Core Viewpoint - China's hotel industry is experiencing a paradox where record numbers of travelers are leading to declining room rates, largely attributed to the discounting practices of Trip.com Group Ltd [1][4]. Group 1: Impact of Trip.com on Hotel Operators - Hotel operators, such as those in Zhejiang province, report that nightly rates have fallen to levels not seen in over a decade due to Trip.com's frequent discount campaigns [2][3]. - Operators are compelled to cut prices by at least 15% to maintain visibility on Trip.com, which has become essential for connecting travelers with small operators [3][4]. - The dominance of Trip.com, which controls approximately 56% of China's online travel market, has contributed to a recovery in domestic tourism, with nearly 5 billion trips recorded in the first three quarters of 2025 [6]. Group 2: Regulatory Concerns and Market Dynamics - The Chinese government is investigating Trip.com for alleged antitrust violations, focusing on its market position and the deflationary effects on the hotel sector [4][5]. - Revenue per room in China remained flat in 2025, contrasting with gains in other Asian markets, indicating a stagnation in profitability despite increased demand [5]. - The hotel industry faces challenges such as oversupply and cautious consumer spending, leading to significant losses as hotels reduce rates to fill vacancies [7]. Group 3: Exclusive Arrangements and Market Practices - Trip.com's "er xuan yi" exclusivity arrangements limit competition by preventing top-tier merchants from listing on rival platforms, which has drawn regulatory scrutiny [8][9]. - Merchants not bound by these exclusivity agreements report being pressured to offer the lowest prices on Trip.com's platform to avoid penalties like reduced search rankings [9].